Stock Market News Today 2018/08/02
Trade War News Today. President Donald Trump wants increase the proposed tariffs on some $200bn in annual imports from China to 25 per cent from the 10 per cent announced last month, senior administration officials told reporters on Wednesday.
That move prompted falls for equities markets in Asia with Hong Kong’s Hang Seng among the worst performers, down 2.3 per cent to its lowest intraday level in 10 months. Within this, financials fell 2.3 per cent, the technology sector dropped 3.6 per cent and consumer cyclical stocks shed 4.8 per cent. Mainland Chinese stocks also fell with the CSI 300 index of Shanghai and Shenzhen stocks down 2.6 per cent to a one-month low.
The US government’s approach stands in contrast to the softening approach from Google, one of its biggest companies. The tech company is considering a relaunch of its search engine in China— a dramatic reversal for a company that pulled out in 2010 over censorship concerns.
Separately, the Germany, another country exposed to Trump’s America First approach, wants to avoid a trade war at all costs. But will it succeed given the nation has become Mr Trump’s European punching bag?
Brexit News Today. Is Michael Gove, the Eurosceptic UK environment minister, betraying the Brexit cause?. At a recent dinner he privately discussed a scenario in which the UK would remain “parked” in the European Economic Area, like Norway. In other Brexit news, Credit Suisse has picked Frankfurt as a key post-Brexit centre. The UK is less ready for life after the divorce. As the FT’s deputy editor points out, the debate on food stockpiling shows Britain is not even prepared for the preparations to leave the EU.
Fidelity News Today. Taking things to a new level. The asset management industry crossed a Rubicon on Wednesday. Fidelity launched the first zero-cost index funds in the US, ratcheting up the passive investing price war to a new level and sending rivals’ shares lower. If the aim was to trigger stock drops in its rivals, such as BlackRock, then it worked.
Trump News Today. “Fighting back, not obstructing.” That was the White House’s response to criticism of Donald Trump after the US president used a Twitter offensive to urge the attorney-general to end the Russia probe “now”. The Trump administration also escalated a row with Turkey over the detainment of an American pastor by imposing sanctions on two Turkish ministers. The lira weakened to a record low against the dollar in response.
Tesla News Today. Tesla beat Wall Street revenue expectations with its latest earnings and made a confident prediction about the rest of the year. Elon Musk, chief executive, also tried to rebuild relations with analysts after a testy earnings call last quarter. Tesla’s shares had already risen on news of the company’s latest earnings, but jumped higher on Mr Musk’s attempts to apologise.
Federal Reserve News Today. A day after India lifted interest rates and the US Federal Reserve signalled another rate rise ahead, the Bank of England is widely expected to raise its interest rates from crisis-era lows. But in times of uncertainty, a UK rate rise would be premature, writes Patience Wheatcroft.
Pompeo News Today. Mike Pompeo, US secretary of state, will begin his visit to Malaysia and Singapore with a stop in Kuala Lumpur. The trip comes after this week’s announcement that the US would spend just $113m in Indo-Pacific investments to counter China’s $1tn.
Stocks to Watch News Today. Citigroup downgraded Pearson, the textbook publisher, from “buy” to “neutral” on valuation grounds.Citigroup’s team remained positive on Pearson’s prospects in the US and argued that investors have exaggerated risks in the core business while underestimating growth potential elsewhere in the group. But with Pearson outperforming by 26 per cent year to date, its earnings multiple has expended to a 20 per cent premium to the market, said Citi. “We expect the price-to-earnings ratio to contract fast as the group continues to grow (and see absolute fair value at 975p per share), but we acknowledge it may be 12 months until we get a clear line of sight on 2019 trends, a critical year in confirming our view,” it said.
Stifel downgraded Rentokil Initial to “hold” from “buy” with an unchanged 360p target.
“Whilst there is little to fault the company, trading is going to script after the business was successfully re-tuned to the pest control and hygiene segments, none of this is likely to come as much of a surprise to investors. Our view is that the share price now fully incorporates the upside from continued strong strategic delivery, limiting the scope for further material outperformance. Our view of value, which makes some allowance for continued M&A activity, remains at 360p, which is no longer sufficient to warrant a continued positive recommendation.”
In brief: Standard Chartered raised to “hold” at HSBC; SSP upgraded to “hold” at Canaccord; Hammerson cut to “underperform” at Jefferies; IMI downgraded to “hold” at Liberum; Rightmove downgraded to “sell” at Berenberg; 4 Imprint raised to “hold” at Berenberg; Petra Diamonds downgraded to “sell” at Investec; DNO upgraded to “outperform” at RBC; Enel cut to “neutral” at Goldman Sachs; EDF raised to “equal-weight” at Morgan Stanley; Proximus upgraded to “hold” at Deutsche Bank; Aéroports de Paris upgraded to “equal-weight” at Barclays; Peugeot raised to “buy” at Citigroup; Maersk cut to “neutral” at Goldman Sachs.
Commodities News Today. Oil prices bounced back following Wednesday’s fall. Crude was knocked back in US trading yesterday after the Energy Information Administration figures showed crude inventories climbed by 3.8m barrels in the week to July 27, confounding expectations for a fall of 2.8m barrels. Brent crude was 0.6 per cent higher at $72.80 a barrel while West Texas Intermediate rose 0.2 per cent to $67.80 a barrel.
Gold is up 0.2 per cent to $1,218.50 an ounce after closing at its lowest point in more than a year on Wednesday.